telecommunications

Proposed AT&T Merger Made for Strange Bedfellows

NEW YORK, NY - MARCH 21: Executives at AT&T attend a news conference where it was announced that AT&T Inc. will be buying its wireless rival T-Mobile USA from Deutsche Telekom AG for $39 billion in cash and stock on March 21, 2011 in New York City. The deal, which will be scrutinized by U.S. regulators, would create the nation's largest wireless carrier if approved. The deal would likely result in domestic job cuts. T-Mobile USA employs about 38,000 people while AT&T employs an estimated 267,000 people. (Photo by Spencer Platt/Getty Images)(Spencer Platt/Getty Images)

The Justice Department’s announcement on Wednesday that it would sue to stop AT&T’s merger with T-Mobile may be only the beginning of a major legal fight, but reaction to the news highlighted the sometimes unusual divisions and alliances that have marked debate over the deal.

The department's lawsuit is either a win or a loss for consumers depending on who was asked. While some opinions on the deal are predictable, with consumer groups and competing wireless companies lining up against free-market think tanks and AT&T’s lobbying efforts, the specific impacts of the merger have created some strange bedfellows.

Some organized-labor groups took AT&T’s side, facing off against consumer advocates and liberal critics in Congress. Communications Workers of America, which has long supported the merger and which was promised union jobs out of a deal, argued that blocking it would hurt workers.

“The DOJ’s action would put good jobs and workers’ rights at the bottom of the government’s priorities,” the union said in a statement.

Some key Democrats spearheaded opposition to the deal in Congress, but earlier this year, about 80 House Democrats and some Republicans, many from rural regions, wrote to federal officials extolling the benefits of the proposed $39 billion merger, especially the potential to expand wireless access to underserved areas.

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On Wednesday, however, congressional opponents applauded the Justice Department’s suit.

“The Justice Department’s decision to take action to block AT&T’s purchase of T-Mobile is a victory for competition, consumers, and choice,” said Rep. Ed Markey, D-Mass., a senior member of the House Energy and Commerce Committee.

House Judiciary ranking member John Conyers, D-Mich., called the lawsuit a “win for consumers,” and California Rep. Anna Eshoo, the top Democrat on the House Communications and Technology Subcommittee, signaled support for the decision as well.

In the Senate, Judiciary Antitrust Subcommittee Chairman Herb Kohl, D-Wis., said the action would protect consumers against a powerful and growing industry.

“I have long believed that this merger would be a terrible deal for consumers, and I’m pleased the Department of Justice has taken the wise step of officially opposing it,” chimed in fellow Judiciary Committee member Sen. Al Franken, D-Minn.

And while lawmakers who represent rural areas may have been excited about the merger’s potential benefits, rural wireless carriers took a dim view. They joined Sprint, whose stock value shot up more than 8 percent after the news, and Cellular South in celebrating the agency’s decision.

“This is an extraordinary announcement—one that confirms our belief that this merger cannot be conditioned into acceptance,” Rural Cellular Association President Steven Berry said.

AT&T is likely to put up a stiff fight in federal court, and the Federal Communications Commission has yet to officially weigh in, but some trade and public-interest groups said the decision was obvious.

“From the outset, it was clear that this merger was anticompetitive,” said Ed Black, president of the communications trade group CCIA. “This was a slam-dunk decision for the DOJ, as this was a textbook case of a blatantly anticompetitive horizontal merger.”

"It's encouraging to see the federal regulators have not been snowed by AT&T's promises and bluster,” Craig Aaron, president of the advocacy group Free Press, said in a statement. “Its smoke-and-mirrors effort was a good front for a while, but when you get down to the facts of the matter, this was a bad idea from the start, and no amount of corporate spin can overcome that reality.”

Largely absent from Wednesday’s flurry of statements was reaction from the legion of often obscure and seemingly unrelated interest groups whose support AT&T had plugged all summer.

“The U.S. government has been creeping further away from the original intent of antitrust laws with each court decision,” said Marc Oestreich, a legislative specialist for the institute. “Today’s move to block the merger of AT&T and T-Mobile signals they’ve forgotten the intent of the law altogether. It is high time that regulators and bureaucrats ask themselves what is in the best interest of the consumer.”

TechFreedom, another think tank, said the decision was surprising and disappointing.

“The department's sensible merger guidelines, had they been applied, would have found the deal a great benefit to consumers at the local level, where mobile services are bought and used,” it said. TechFreedom President Berin Szoka said the merger was simply an attempt to fix government-caused problem in the wireless market.

“The real problem here is outdated central planning of spectrum,” he said. “This merger was in part an attempt to overcome government mismanagement of the most vital resource of the digital economy.”